Facebook flounders as share price drops by 10%

Facebook shares fell more than 10% below their $38 (£24) issue price shortly after trading started yesterday, as support from banks which underwrote the initial public offering dissipated after Friday's market debut.

Facebook shares fell more than 10% below their $38 (£24) issue price shortly after trading started yesterday, as support from banks which underwrote the initial public offering dissipated after Friday's market debut.

The shares were down as much as 10.5% at $34.22 (£22) in early afternoon trading - they closed at $38.23 (£24) on Friday.

By contrast, Apple shares climbed 1.5% to $538 (£341) today.

Social networking company Facebook's stock market debut was marred by a shaky opening on the Nasdaq which will be reviewed by the SEC, and a falling share price which forced lead underwriter Morgan Stanley to defend the $38 (£24) price level by purchasing shares on the open market.

Those who bought Facebook shares on Friday now face an anxious few days, amid reports that hedge funds are aiming to profit from any weakness in the social networking site's shares price.

It is feared demand for the shares may also be hit by Europe's deepening debt crisis, which has sent investors fleeing for less risky investments such as US, UK and German government bonds in recent days.

The declines will hit the vast fortunes made by founder and chief executive Mark Zuckerberg and investors including Bono.

After months of building hype, shares in Facebook closed just 0.6% higher on their first day's trading on New York's Nasdaq.

Facebook and its bankers, led by Morgan Stanley, last week raised the number of shares they were selling to 421m and eventually sold them at $38.

While that helped Facebook and some of the early investors in the company pocket $16bn analysts say it was an aggressive strategy that now leaves the shares vulnerable.

"Facebook shares will drift lower from here," said Michael Pachter, an analyst at Wedbush Securities. "$16bn of shares in one company was too much for the market to absorb on one day."

Facebook founder and chief executive Mark Zuckerberg now faces intense pressure to convince shareholders that he can convert the site's 900m users into growing profits.